When it comes to investing, sometimes it’s perhaps better to know what NOT to do. The very best investors know what they’re good at and stick to that. It’s all about knowing your limitations. In fact, it’s the most common trait of world-famous investors such as Warren Buffett or Ray Dalio. When you get them in a room together, all they want to talk about is the different methods and strategies which they employ to protect their downside.

Here are some traits that’ll surely lead you down a path of frustration and below-average, unsuccessful returns. You’ll most likely NOT want to embody these.

1) Investing with your emotions

To be fair, even the best investors sometimes go with a hunch, but only after intense research and preparation.

What we want to avoid is getting caught up in the whirlwind cycle of buying and selling. We don’t want to be the schmuck buying into the media hype, or fear-mongering, of any particular stock. Allowing your decisions to be dictated by your emotions will most likely result in buying at the top and selling at the bottom – that’s a big no bueno!

2) Not having a written plan

Think you’ll just pick up a few shares here and a few shares there and then ride the stock market wave all the way to the top like some sort of pro surfer?

Think again.

It might work once, it might work twice, but it’s guaranteed to backfire over the long run.

Listen…would you ever take a multi-hour road-trip without consulting a map/GPS?

If the answer is no, then what makes you think you can take a multi-year road trip (investing over the next 30 years of your life) without a road map?!

By having a written plan, you make sure that you eliminate making decisions that don’t jive with your investment philosophy. It will keep you centred. You’ll be less susceptible to making emotional decisions because you’ll be forced to refer to your plan first. The plan acts as a check on your emotional self.

Your Personal Investment Plan (PIP) should look out to the future and lay out a few personal financial goals that you wish to achieve over the next few years. You could even put down a few goals further out into the future but be aware that these will most likely morph and change as time passes. It doesn’t hurt to aim high, though!

The PIP can be as simple or complex as you need it to be. You can break down your strategy by investment class, how much you expect to return and what you will do in the event that you don’t meet your goals…or even if you do.

3) Thinking you’re a trader

Thinking you’re a trader can easily be the quickest way to losing all your money.

We’ve said it before, but in the world of investing you’re either a know-nothing investor or a know-something investor. If you’re a know-nothing investor, then you sit back and put your money in a diversified fund and watch it grow. If you’re a know-something investor then you bust your ass and you learn all there is to know about your specific corner of the investing biz.

In either of those worlds, there’s really not much room for a day-trader. Trading is a tough gig, and emotions run high. You’re making and losing money constantly, and you’ll probably fail unless you have some sort of specialized knowledge or proprietary technology (i.e. high-frequency trading software).

Take a second to think about who makes money when you make a trade. It’s the brokerage firm or online clearinghouse. They earn a cut on each trade…so the more trades you make, the more money they rake in. It’s totally in their interest to get you to trade as much as possible.

Don’t fall for it. Buy and hold is still very much the name of the game. Get your money in good, and then review your holdings once a quarter. Make your changes if you must at that point and then get out. That’s it.

4) Not taking care of the simple things

We always want to run before we can walk. It’s tempting to jump into investing, setting up this account and trying out this nifty strategy. Before we can become a kick-ass investor, we really need to take care of the little things.

Have you maxed out your tax-deferred accounts? Are you signed up for your employer-match on your 401K? If not, you’re leaving money on the table…and good investors do NOT leave money on the table.

You’d be surprised how many people aren’t taking care of the little things, especially when it can add up to tens of thousands of dollars over the long run!

What about tax-loss harvesting, are you on top of that?

If you’re not familiar with tax-loss harvesting, it’s a complicated-sounding concept that isn’t really complicated at all. Using it can save you a ton of money.

Basically if, at the end of the year, you can write-off the money that you are losing on an investment and use it to off-set your tax obligations on capital gains.

So let’s say you have two investments in stock A and stock B and the capital gains tax is 15%. Stock A is a loser and stock B is a big winner.

Normally you might just realize your gains at tax season and pay your tax obligation. What people don’t realize is that by selling your losers and “realizing” the loss you can actually reduce the eligible amount under the capital gains tax (so you are taxed on a smaller amount of money).

The reason we don’t usually want to sell our losers is that we’re risk-averse. That’s normal; people hate to lose money more than they like getting it. By selling our losers we’re admitting that we’ve lost money and if you sell there’s no longer a chance that the stock will bounce back.

Wall Street Survivor is on a mission to demystify investing through interactive and comprehensive education.

Online financial education is typically very dry and full of jargon. We believe online investing should be fun, challenging and potentially very lucrative. And we want you to share in that fun and excitement. So we don’t just teach investing and personal finance topics by telling you how. We get you doing right away, by competing in virtual stock trading games.